I’ve started my first job… Are there any tax questions I should ask my new employer?
Yes – check that your employer has submitted a tax file number declaration form to the ATO on your behalf when you start working for them. This gives the ATO a head’s up that you’ve started paid employment.
The tax file number declaration form will have a question asking you whether you want to claim the tax-free threshold. If you only have one job, tick “yes” to make sure you’re taxed at the right rate. If you have more than one job, you should only claim the tax-free threshold for one of them (usually your main job). Tick “no” at the tax-free threshold question for any other jobs you have. If you get this wrong and claim the tax free threshold from multiple jobs at once you’ll likely end up being under-taxed during the year and could end up with a big tax bill at tax time!
When should I start paying tax?
Generally, the first $18 200 of income you earn during a year is tax free – this is called the tax-free threshold. This means you won’t have to pay any tax on that income. BUT: depending on the payroll system your employer uses, they may still withhold tax from your weekly pay even if your income will be less than this amount. Don’t panic just yet: if your total income for the year is less than the tax-free threshold, you’ll get all of the tax you paid during the year back as your tax refund!
As your income increases above $18 200 you will have to pay tax. Your tax rate is calculated on a sliding scale. The amount of tax you pay increases as you earn more.
The table below illustrates the current income tax thresholds.
||Tax payable on income
|$0 - $18200
|$18 201 - $37 000
||19c for each $1 over $18 200
|$37 001 - $90 000
||$3 572 plus 32.5% of amounts over $37 000
|$90 001 - $180 000
||$20 797 plus 37% of amounts over $90 000
|$180 000 and over
||$54 097 plus 45% of amounts over $180 000
Are there different kinds of tax?
Yup. Aussies are required to pay many different kinds of taxes. Not only is there tax on your income (called income tax), there are taxes you pay on “Goods and Services” (GST), when buying a house (Stamp duty), when you own land (land tax) and when you buy a car. Even businesses have to pay tax on the money they earn (called Company tax).
I work for myself – do I still need to pay tax?
In short, yes – in Australia it is illegal to work in paid employment without paying tax on the money you earn. (Unless you earn under the tax free threshold - $18 200).
What should I do if my employer doesn’t take tax out of my wages?
If your employer isn’t taking tax out of your wages, first you should ask them why. Your income may be under the tax-free threshold, which means you won’t need to pay any tax. It could also be an innocent mistake on their part.
You’re not off the tax-hook if you work for yourself or are paid cash, either. When you complete your tax return at the end of the financial year you’ll have to pay tax then on any income you haven’t already paid tax on. So try not to spend all your dollars before you’ve paid tax on them!
A general rule is to keep at least 30% of any money you earn and which you haven’t paid tax on aside so you’re not left with a nasty bill from the ATO at tax time.
How is my tax refund calculated?
Your tax refund (or in some cases tax payable to the ATO – yes, some of us sad suckers have to pay more money, come tax time) is essentially the difference between the tax you already paid during the year and what you should have paid based on your final income for the year.
For example: Mikey is taxed $50 each week out of his weekly pay. When multiplied by 52 weeks in the year, Mikey has paid $2 600 worth of tax during the year. Based on Mikey’s yearly income of $27 000 he should have actually paid a total of $1 487.20.
So, his tax refund is the difference between what he’s already paid during the year and what he should have paid: $2 600 - $1 487.20 = tax refund of $1 112.80.
Where do I get my payment summary?
In 2018-19 the ATO introduced a new reporting system called Single Touch Payroll. This means that some employers will no longer provide an end-of-year payment summary like they used to.
Your first port of call for a payment summary should be your employer. If they say they’ve sent the information to the ATO already, don’t worry.
You can either get it yourself from the ATO, or ask your tax agent or accountant to get it. They’ll access the information from your ATO file, saving you the trouble of dealing with Ye Olde Tax Office yourself.
Where do I get my pay slips from?
After you’re paid each week, fortnight or month your employer should provide you with a payslip, either electronically or on paper, which itemises how many hours you worked since the last pay date and how much money you’ve been paid. Always check your payment slip each period to ensure you’ve been paid for all the hours you’ve worked. Don’t know how to read your payslip? Solve that problem here.
Can I pay someone to complete the tax claim for me?
Yup. Over 70% of Aussies do so, using the services of a tax agent or accountant to prepare their tax returns for them each year. Yes, it costs you money, but it’s usually only a small fee, and the peace of mind that comes from getting an expert to check your tax return for any errors and make sure you get the best tax refund is often worth it. Plus your tax agent fees can be claimed as a deduction next year to boost your refund!
This doesn’t give you permission to be tax ignorant, though – make sure you understand how tax works, even if you’re getting someone else to do your return. Knowledge is power, people!
The ATO offers a free lodgement service, but they’re focused on collecting revenue, not helping you get the biggest tax refund possible.
Can I track or choose where my tax money goes?
It pains us to say this, but no. The government publishes an annual budget that shows how much money they’re spending on the various free services they offer to Australians. This gives you a general idea of where your tax goes, but you can’t specifically choose for, say, all of your tax to go towards new marine reserves and protecting the environment rather than giving random public buildings a makeover – instead the Government decides how they will spend all of the tax they collect each year.
Is there anything I can get money back for?
Usually there is! A general rule is that if you’ve made a purchase or have an expense that is related to your work, then you can claim that expense as a tax deduction. If you can answer yes to each of the items below in relation to an expense item, then the item will probably qualify as a deduction.
- You paid for the item yourself out of your own pocket.
- You were not reimbursed or paid back by your employer.
- You have a receipt or other evidence of the purchase.
- The item you purchased was for your work.
If you’re not sure, always keep the receipt and ask your accountant. They’ll be able to make sure you’re not missing out on valuable deductions that can boost your tax refund. Read our guide on tax deductions here
Why don’t I get 100% of an expense back in my tax return?
It’s a common myth that if you spend, say, $100 on a tax-deductible item, you’ll get $100 back in your tax refund.
But, what a tax deduction does is it lowers your taxable income: the amount of your income that you must pay tax on. So, if you earned $20 000 during the year and have $1 000 in deductions, the amount of your income you have to pay tax on is $20 000-$1 000 = $19 000. Any tax you paid on that additional $1 000 of income will be added to your tax refund.
I have to do my first tax return soon, and I have no idea where to start. What should I do?
There are loads of resources and tips online to help you become more tax savvy, but it’s probably a good idea to not go it alone for your very first tax return. Using a tax agent like Etax.com.au
could make the process less scary. You don’t even need to make an appointment: you can jump online 24/7, enter your details and connect directly with an accountant who’ll answer any question you have and make sure you get the best possible tax refund.
Ready to rumble your first tax return? Click here for a handy checklist on what you need
Find out more about how to do your taxes here:
Thanks to our friends from Etax.com.au for giving us access to their tax know-how for our tax blogs!